Kansas Adopts Remote Seller Rule Without Any De Minimus Level of Sales

Wayfair related state sales tax developments have continued since the ruling came down last summer, with virtually every state with a sales tax making changes over the past year in how they handle out of state sellers.  But the state of Kansas has decided to go where no one else has dared to tread, issuing Notice 19-04, Sales Tax Requirements for Retailers Doing Business in Kansas.[1]

As you read the document you’ll note one key item is missing—the minimum amount of sales (either in dollar volume or number of transactions) necessary to trigger the need to register and collect Kansas sales tax.  That is because, in the view of the Kansas Department of Revenue, any amount of sales into Kansas is enough to trigger the requirement to collect and pay over the tax

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Supreme Court Declines to Hear Appeal of Minnesota Trust Case

After having decided that North Carolina could not tax a trust based solely on residence of a beneficiary in the Kaestner Trust case, the Court had to decide what to do with another case.  Shortly after the North Carolina Supreme Court ruled against the North Carolina Department of Revenue in the Kaestner case the Minnesota Supreme Court ruled against the state of Minnesota’s ability to impose its tax on a trust on different grounds.

On June 28, 2019, the Court decided not to hear the Minnesota Department of Revenue’s appeal of the Minnesota Supreme Court’s ruling in the Fielding case.[1]  The Minnesota Supreme Court ruled that the state could not impose an income tax on a trust when the only connection with Minnesota was the fact that the settlor had been a Minnesota resident when the trust became irrevocable.[2]

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Merely Having an In-State Income Beneficiary Insufficient to Allow a State to Tax All Trust Income

The U.S. Supreme Court appears to be making June 21 its annual tax opinion day.  Or, at least, they’ve issued the major tax opinion of the term on June 21 for the past two years.  While last year’s issue related to sales taxes (Wayfair), this year the issue is whether a state can tax a trust solely based on the trust having a resident current income beneficiary, even if that beneficiary has no right to force a current distribution of such income, no such distribution is made, and there’ s no guarantee the beneficiary will ever receive such a distribution.

A unanimous Supreme Court decided that the answer is no, a state cannot impose its tax in that situation, in the case of North Carolina Department of Revenue v. The Kimberly Rice Kaestner 1992 Family Trust, United States Supreme Court, Case No. 18-457.[1]  Justice Sotomayor wrote the main opinion on behalf of the Court.

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South Dakota Governor Proposes Bills to Begin Requirement of Collection of Tax by Out of State Sellers and Marketplaces on November 1

As states scramble to begin collecting sales taxes after the Supreme Court’s decision in the case of South Dakota v. Wayfair, one state that has not yet been able to begin collecting the tax is, of all things, the state of South Dakota itself.  Those who have read the Supreme Court’s decision will remember that the decision did not actually formally approve South Dakota’s law and order the defendants to pay the taxes.  Rather, the case was sent back down to South Dakota state courts to consider other potential objections.

In order to get around this problem, the Governor of the State of South Dakota has called a special session of the state legislature for September 12 and issued two draft pieces of legislation to allow the state to begin collecting taxes from remote sellers beginning on November 1, 2018.

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Colorado Publishes Rules for Sellers to Comply with Tattletale Use Tax Reporting

The Colorado Department of Revenue has published an emergency rule (Rule 39-21-112(3.5)) to implement Colorado’s “tattletale” use tax reporting requirement for sellers who have more than $100,000 of sales into Colorado and do not collect Colorado sales tax.  The law in question is the one that was upheld by the Tenth Circuit Court of Appeals in the case of Direct Marketing Association v. Brohl, CA10, Case No. 12-1175, 2/22/16, cert denied.

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Washington State Enacts Use Tax Tattletale Bill with Very Low Threshold

The state of Washington has upped the ante regarding the risk to businesses who don’t pay attention to individual state laws requiring reporting on sales to residents of a state by a business with no connection with the state.  Washington’s governor signed into law Washington H.B. 2163, a “tattletale” use tax bill that is triggered whenever a remote seller in a year has more than $10,000 in gross sales to Washington state residents.

A “tattletale” bill does not attempt to require remote sellers to collect sales tax for the state on their remote sales.  Rather the bill requires that such sellers take various steps to “turn in” such buyers to the state and “motivate” the buyers to comply with their use tax obligations.  The law will often require some form of notice to potential buyers of their use tax obligations, along with later reports given at the end of the year to both the buyers (listing items they bought for which use tax would be due) and the state in question.

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Colorado Law Requiring Out of State Sellers to Report on Colorado Customers Who May Owe Use Tax Upheld by Tenth Circuit

Normally in this venue we discuss federal tax matters, but in this case the applicability of a Constitutional provision (or perhaps lack of a provision, given the issue is the Dormant Commerce Clause) may have a broad impact.  The case in question is a challenge to a Colorado provision requiring out of state sellers to report to the state customers who are residents of the state to assist in collection of use tax from those individuals (Direct Marketing Association v. Brohl, CA10, Case No. 12-1175).

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